The Companies Act 2013 is the governing legislation for companies in India. It outlines various provisions and guidelines for the functioning and management of companies, including the appointment and removal of key officers such as the company secretary. Under the Companies Act 2013 in India, the position of a company secretary holds great importance in ensuring compliance and maintaining corporate governance within a company. However, there may be situations where it becomes necessary to remove a company secretary from their role. In this article, we will discuss the circumstances in which a company secretary may be removed after company registration in India and also discuss the removal of a company secretary while adhering to the provisions of the Companies Act 2013.
Who is a Company Secretary?
A company secretary plays a vital role in ensuring compliance with legal and regulatory requirements, maintaining transparent corporate governance, and facilitating effective communication within the company and with external stakeholders. However, certain situations may arise where the removal of a company secretary becomes necessary.
Grounds for Removal of a Company Secretary
Under Section 203 of the Companies Act 2013, a company secretary can be removed by the company’s board of directors or shareholders under certain circumstances. These grounds for removal of a Company Secretary include:
- Resignation: A company secretary may voluntarily resign from their position by submitting a resignation letter to the company’s board of directors. The resignation should be duly acknowledged and recorded in the minutes of the board meeting. Upon resignation, the company secretary ceases to hold the office, and the company must appoint a new secretary within 6 months.
- Removal by the Board of Directors: The board of directors may remove a company secretary if there are valid reasons to do so. These reasons may include:
- a. Incompetence or Negligence: If the company secretary fails to perform their duties diligently, exhibits incompetence, or engages in acts of negligence that harm the company’s interests, the board may decide to remove them.
- b. Breach of Confidentiality: If the company secretary breaches their duty of confidentiality by disclosing sensitive company information without proper authorization or for personal gain, it can lead to their removal.
- c. Non-Compliance: If the company secretary consistently fails to comply with legal and regulatory requirements, violates provisions of the Companies Act, or fails to maintain proper records, the board may consider removal.
- d. Misrepresentation or Fraud: Any acts of misrepresentation, fraud, or dishonesty by the company secretary can be grounds for their removal.
- e. Conflict of Interest: If the company secretary has a conflict of interest that hinders their ability to act in the best interests of the company, the board may decide to remove them.
- 3. Removal by Shareholders: Shareholders of the company may pass a special resolution to remove the company secretary if they are dissatisfied with their performance or conduct. The resolution must be approved by at least 75% of the shareholders present & voting at a general meeting.
Brief Idea on Procedural Requirements for Removal of a Company Secretary
The removal of a company secretary, whether initiated by the board or shareholders, must follow the procedural requirements prescribed by the Companies Act 2013. These include:
- Notice: A notice must be issued to the company secretary, providing a reasonable opportunity for them to present their case before the board or shareholders.
- Board or General Meeting: A meeting of the board of directors/shareholders, as applicable, must be convened to discuss and decide upon the removal of the company secretary. The removal should be properly recorded in the minutes of the meeting.
- Intimation to Registrar of Companies: Once the removal decision has been made, the company must intimate the Registrar of Companies (RoC) within 30 days, along with the necessary documentation.
A Step-by-Step Guide for the Removal of a Company Secretary in India as per Companies Act 2013
Following is the step-by-step process for the removal of a Company Secretary:
- Step 1: Board Meeting and Passing of a Special Resolution:
The removal process begins with convening a board meeting to discuss the removal of the company secretary. The board must pass a special resolution for the removal, as stipulated in Section 203 of the Companies Act 2013. The resolution should clearly mention the reasons for removal and be approved by a majority of the directors.
- Step 2: Filing of Form DIR-12:
After passing the special resolution, the company is required to file Form DIR-12 with the Registrar of Companies (RoC) within 30 days from the date of passing the resolution. Form DIR-12 is used for the appointment or cessation of directors, including the removal of a company secretary. The following vital documents must be attached to the form:
a. Certified copy of the board resolution for the removal of the company secretary.
b. Notice of the board meeting where the resolution was passed.
c. Resignation letter from the company secretary, if applicable.
d. Any other relevant documents as required by the RoC.
- Step 3: Intimation to the Company Secretary:
The company must formally communicate the decision to remove the company secretary by issuing a letter or notice. The letter should mention the effective date of removal and inform the company secretary about their rights to be heard at a general meeting. It is essential to maintain transparency and adhere to the principles of natural justice throughout the process.
- Step 4: Filing of Form MGT-14:
Once the company secretary is removed, the company is required to file Form MGT-14 with the RoC within 30 days of passing the special resolution. Form MGT-14 is used to notify the RoC about the resolution passed at the general meeting. The following vital documents should be attached to the form:
a. Certified copy of the special resolution passed for the removal of the company secretary.
b. Notice of the general meeting where the resolution was passed.
c. Any other relevant documents as required by the RoC.
- Step 5: Updating Statutory Registers:
The company must update its statutory registers to reflect the change in the position of the company secretary. The registers that need to be updated include the Register of Directors & Key Managerial Personnel (KMP), the Register of KMPs, and any other relevant registers maintained by the company.
- Step 6: Compliance with Additional Requirements:
The company should ensure compliance with any additional requirements specified in its articles of association or any agreement entered into with the company secretary. For example, if there are notice periods or specific provisions regarding termination in the employment contract, those should be followed accordingly.
In summary, the Companies Act 2013 provides guidelines and grounds for removing a company secretary, whether initiated by the board of directors or shareholders. The removal process must adhere to the procedural requirements laid out in the provisions. Removing a company secretary after company registration in India requires adherence to the provisions outlined in the Companies Act 2013. By following the step-by-step guide provided above, companies can ensure a smooth and legally compliant process for removing a company secretary. It is crucial to consult with legal professionals or company secretaries to ensure all legal obligations are met and to mitigate any potential legal risks during the removal process. While the appointment of a company secretary is a crucial step for ensuring compliance and efficient corporate governance, circumstances may arise where their removal becomes necessary.
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